Could Fed Liquidity Plunge By Half?

The Long-Term Plan To Cut The Fed B/S By US$1.7 Trillion

The recently published Fed proposal for balance sheet adjustment represents a technical ideal and ignores market reality. For the plan to work, the US Treasury and Fed would need to establish a level of supply coordination, and the private sector a level of demand stability, that rarely exists in practice. [This is a brief synopsis of a more detailed report we published for institutional clients. It is technical, but essentially aims to debunk the idea that shrinking the Fed’s balance sheet is a neutral policy.]